Katanning Gold Discovery

The Katanning Gold Project (“KGP”) lies within the under-explored Katanning Greenstone Belt in the South-West Archaean Yilgarn Craton in Western Australia (Figure 1). Gold mineralisation at the KGP occurs broadly aswell-defined stacked lodes described as orogenic-shear-hosted deposits that have undergone post mineralisation deformation. Associated gold remobilisation has resulted in formation of pipe-like structures of elevated grade.

Ausgold continues to utilise its extensive database and innovative exploration modelling to identify and refine fresh exploration targets as well as re-evaluating of historic targets and prospects as part of near-mine and regional exploration efforts. This exploration effort combined with the detailed Resource Modelling conducted as part of the recent scoping study has renewed interest in and highlighted the prospectivity and relative exploration immaturity of the Katanning Region and its potential to host significant gold mineralisation.

Ausgold’s aim in the short term is to quickly add ounces to accelerate mine development as envisaged in the recent Scoping Study completed in November 2015 and in the medium term deliver new mineral resources to provide longevity to the mining operation.

Location of Ausgold’s (AUC) Katanning Gold Project (KGP) in the Yilgarn
Figure 1.Location of Ausgold’s (AUC) Katanning Gold Project (KGP) in the Yilgarn.

Gold mineralisation was discovered in the Katanning region by Otter Exploration in 1979, and since that time several other companies have conducted exploration programmes.  Open cut mining operations occurred at Jinkas (Figure 2) and Dingo (Figure 3) from 1995 until 1997, with a reported production of 20,000 oz at an average head grade of approximately 2.4 g/t.  Ausgold acquired the mining tenements that cover the deposits in 2011, and has conducted a number of resource delineation drilling programmes, with the most recent in 2015. 

Historic Jinkas Pit, looking south
Figure 2. Historic Jinkas Pit, looking south

Historic Dingo Pit, looking north-north west
Figure 3. Historic Dingo Pit, looking north-north west


The KGP is situated approximately 260km southeast of Perth and 35km east-north east of Katanning within the Great Southern Region of Western Australia (Figure 4).The site is accessed by sealed highway with sealed and high-grade gravel roads service the surrounding region. Access to the various prospects and site office is good and is generally by way of sealed roads, well maintained gravel roads and tracks and farm tracks.


Katanning Gold Project Locality
Figure 4. Katanning Gold Project Locality

Geology and Mineralisation

Gold mineralisation at Dingo and Jinkas deposits, and in the Lone Tree, Jackson and Olympia is hosted by medium- to coarse-grained mafic gneisses that represent Archaean greenstones metamorphosed to granulite facies (Figure 5). The greenstones are intruded by sheet-like monzo-granite sheets.


Katanning Gold Project, Ore body and Prospect Locations
Figure 5. Katanning Gold Project, Ore body and Prospect Locations


In open pit exposures and drill core the host sequence displays a strong gneissic layering that dips at 30-45 degrees toward the ENE (local grid east). Previous exploration models had focused on this pervasive layering and gold mineralisation was interpreted as comfortable with the gneissic banding. However, a study and 3D modelling in 2014 by SRK (Greentree, 2014) and subsequent modelling by Ausgold, revealed a new structural and mineralisation model, summarised as follows:

  • early D1 structures were later transposed by D2 and are associated with peak metamorphism and granite intrusives
  • D2 structures include a strong S2 foliation and isoclinal folding
  • Gold was remobilised during D2 into the hinge zones of isoclinal folds
  • D2 isoclinal folding was modified during D3 with folding and dextral shearing on ENE axis
  • D4 under NNW – SSE compression resulted in the development of open E-W folding and doubly plunging north (Jinkas) -south (Dingo) mineralisation.

At least two corridors of mineralisation have been definedby two NNW (local grid north) trending quartz-monzogranite sills that form the footwall to mineralisation. Gold mineralisation also occurs in the footwall, below the upper quartz-monzogranite sill, and above a second lower quartz-monzogranite sill (approximately 120m thick). This mineralization occurs within the gneissic package, between the two quartz-monzogranite sills and is referred to as the White Dam, Lone Tree, and Jackson prospects (Figure 5).

At Dingo a single quartz-monzogranite sill has been defined and is approximately 120m thick. Gold mineralisation is hosted within the mafic gneiss in the hanging wall, above the contact with the quartz-monzogranite. Mineralisation in the KGP area is also cut by a number of east and northeast striking Proterozoic dolerite dykes that post-date mineralisation and granulite metamorphism.

Gold occurs predominantly as free gold associated with disseminated pyrrhotite and magnetite, lesser pyrite and chalcopyrite and traces of molybdenite. Vein quartz is rare but the highest-grade parts of the deposits feature thin, dismembered, remnant quartz veins.  Two styles of mineralisation have been recognised:

1. Siliceous low grade mineralisation, metamorphosed reorientated (original) quartz veins with grades <2g/t Au located on limbs of folds;


2. High grade >10 g/t Au mineralisation remobilized during granulite metamorphism. Gold located in hinge zones of folds associated with high concentrations of sulphides (pyrite & pyrrhotite) and magnetite. 

Resources

As a result of advances in recent advances in understanding of the geology and management’s commitment to realising the viability of the KGP, Ausgold engaged industry specialists SRK Consultants Ltd (“SRK”) to complete an updated Mineral Resource estimate (Table 1; Resource Statements and ASX Announcement 21/10/2015).

The updated resources comprise the Jinkas, Dingo, Jackson, Lone Tree and White Dam mineralisation, which extends over a 5.0 kilometre strike length of favourable stratigraphy at the KGP (Figure 5).

Table 1 – Updated Resource Estimate – SRK Consultants (September-October 2015)


Notes: The Mineral Resource is reported at a lower cut-off grade of 0.50g/t gold.  
For the Jinkas Main Lodes, a top cut of 50g/t has been applied (with top-cuts of 15g/t and 20g/t applied for the Jinkas HW Lodes).  For the Dingo Main Lode a top cut of 20g/t has been applied. 
The topographic surface at the KGP is at approximately 360mRL with the updated Mineral Resource estimate stated to a depth of 210mRL (approximately 150 metres below land surface).

The KGP Resource represents a geologically well-defined zone of low to medium grade gold mineralisation. The mineralised domains show variation in thickness along strike; however the drill density has allowed delineation of geometrically coherent and predictable mineralised lodes (Figure 6; interpreted mineralised lodes).

Figure 6. (A) Interpreted Lodes in the Jinkas Area and (B) Interpreted lodes in the Dingo Area
Figure 6. (A) Interpreted Lodes in the Jinkas Area and (B) Interpreted lodes in the Dingo Area.

Individual Resources (Jinkas, Dingo, Jackson, Lone Tree and White Dam) appear to have good potential for economic extraction by modest scale open pit mining (in the form of pit cut backs and new pits) as part of a centralised mining operation. Some potential exists for underground mining at Jinkas where coherent high grade shoots are defined.

Jinkas Footwall Domain Resource Block Model showing selected Whittle Pit design
Figure 7. Jinkas Footwall Domain Resource Block Model showing selected Whittle Pit design (see “Scoping Study”)
 

Jinkas Drill Hole Plan and Cross Sections 18660mN and 18720mN
Figure 8. Jinkas Drill Hole Plan and Cross Sections 18660mN and 18720mN (local mine grid)
 

Jinkas and White Dam Cross Section 18240mN
Figure 9. Jinkas and White Dam Cross Section 18240mN

Scoping Study

Ausgold Ausgold) has completed a Scoping Study for the development of open pit mining and on-site conventional CIL processing at theKGP.The Scoping Study comprises a Mining Study based on Whittle pit optimisation and preliminary open pit designs (by SRK Consulting) and Metallurgy and Processing review (CPC Project Design) (ASX market release 25/11/15).
 
The results of the Scoping Study are positive and indicate the potential for initial open pit gold production of 189,370 ounces of gold (recovered) at operating cash costs (C1) of $928 per ounce.  Preliminary economic studies carried out by Ausgold indicate attractive metrics with potential gross revenue of $316m and potential operating cash flow of $140m.
 
The Scoping Study was co-ordinated by Ausgold with input from independent industry consultants SRK Consulting and CPC Project Design. Study completed at an overall accuracy of capital and operating estimates at +/- 35%
 
Mining Study at KGP
 
Preliminary open pit design based on selected Whittle pit shells has been carried out on the Jinkas and Dingo Mineral Resource by SRK Consulting (Figures 10 and 11) These pit designs enclose 211,152 ounces of gold at Jinkas (165,652oz Au) and Dingo (45,500oz Au). This Mineral Resource comprises 99% of higher confidence Measured (77%) and Indicated (22%) categories (with less than 5% in the Inferred Mineral Resource category; Table 2).

  Measured Resource Indicated Resource Inferred Resource TOTAL
Jinkas 146,931 18,720 0 165,652
Dingo 15,955 28,513 1,034 45,501
TOTAL
162,886
47,233 1,034 211,152
Table 2 – Breakdown of Mineral Resource Categories within preliminary pit designs at Jinkas and Dingo

The Scoping Study assumes development of the Jinkas and Dingo deposits through conventional open pit mining method comprising drill, blast, load (excavator) and haul (truck fleet). The Study assumes a contract mining fleet utilising a 120-200 tonne hydraulic excavator and 60t capacity dump trucks.  The assumptions used in the Scoping Study are outlined below (Table 3).

Mining cost $3.50/t mined
Processing rate 0.92Mtpa
Processing cost (includes G&A) $25.3/t processed (approximately 1Mtpa)
Process recovery 92%
Mining recovery 95%
Mining dilution 5% (at 0.0g/t Au)
Pit wall angles 45 degrees (reflects 20m benches and 5m berms)
Table 3 – KGP Scoping Study Assumptions (Modifying Factors)

Pit Design based on selected Whittle Pit Optimisation at Jinkas
Figure 10 - Pit Design based on selected Whittle Pit Optimisation at Jinkas
 

Pit Design based on selected Whittle Pit Optimisation at Dingo
Figure 11- Pit Design based on selected Whittle Pit Optimisation at Dingo

The preliminary open pit designs also provide estimates of total material movement and strip ratios for the selected pit shells. The total KGP material movement over LOM is 23.6Mt for a LOM strip ratio (SR) of 5.5. On this basis Ausgold has made estimates of C1 cash costs (Table 4).With average KGP C1 cash costs of $928/oz (average SR at 5.5)

Jinkas C1 cash cost at $850/oz (strip ratio of 6.9)
Dingo C1 cash cost of $1,212/oz (SR 2.7)
Table 4 –  KGP preliminary pit design C1 cash costs (and Strip Ratio (SR))

Mining costs over LOM are expected to be low relative to comparable-scale open pit developments in WA reflecting favourable geometry and geology: which should provide lower-cost materials movement (shallow flat dipping mineralisation and short haulage distances).

Metallurgy and Processing review at KGP
 
The Scoping Study assumes mineralisation at KGP will be treated by conventional carbon-in-leach (CIL) process route comprising crushing, grinding, leaching, elution/electrowinning and smelting to produce gold bullion at the KGP location (Figure 12). 
 
CPC Project Design has provided estimates for the capital and operating costs for a 1Mtpa process plant at the KGP, while Ausgold estimated the non-process plant infrastructure costs.  These estimates are tabulated below (Table 5 and 6). 

Item Cost $M
Process Plant Direct Costs 45
Non Process Plant Direct Costs 13
Indirect Costs (EPCM, first fills, commissioning) 12
TOTAL 10
Table 5 – Capital Cost Summary for KGP

Item Cost ($M) Cost ($/t) %
Labour 1.8 1.8 8
Power 9.4 9.4 41
Reagents & Consumables 8.2 8.2 36
Maintenance 2.7 2.7 12
Other 0.7 0.7 3
TOTAL 22.8 22.8 100
Table 6 –  CPC Project Design Operating Cost Summary for KGP (1Mtpa)

The location of the proposed treatment plant will be at the existing plant site adjacent to and south of the proposed Jinkas open pit. This should allow the existing TSF, ROM pad, haulage roads and process plant bulk earthwork levels to be utilised as much as possible.

Process Flow Diagram for KGP
Figure 12 – Process Flow Diagram for KGP

The KGP development will require further investment in a range of infrastructure items including upgrade of the existing tailings storage facility (TSF), ROM loading area and haulage roads. Ausgold has allocated $13m of capital to these items (inclusive of the pre-strip of waste).

The KGP is approximately 35km from the regional town of Katanning so an accommodation camp is not currently proposed at the project site. There is existing water and power to the site.
 
Ausgold Preliminary Economic Study
 
Ausgold has carried out preliminary economic studies based on the inputs from SRK Consultants (Whittle pit optimisations and preliminary pit designs), and CPC Project Design (estimates of process plant capital and operating costs), and Ausgold’s estimates of mining capital costs.

Ausgold estimates average gold production of 47,340oz per annum at operating cash costs (C1) of $928/oz over an estimated 4 year mine life (where C1 includes estimates of mining, processing and site G&A).
 
Ausgold has also estimated AISC (which includes mining, processing, site G&A, corporate overheads, royalties and sustaining capital), gross revenue and operating cash flows for the KGP (using Ausgold assumptions for the USD gold price and AUD:USD exchange rate).
 
Ausgold estimates a life of mine (LOM) gross revenue of $316m and an operating surplus of $140m (gross revenue minus operating cash (C1) costs). Ausgold has assumed a gold price of USD$1,250 per ounce and an AUD:USD exchange rate of 0.75  (in-line with the current AUD gold price of around A$1,600/oz). Ausgold currently has approximately $48m of unused tax losses which can be utilised to off-set corporate tax (ASX market release 28 October 2015 Annual Report).
 
The economic studies include WA State gold royalties levied at 2.5% of gross revenue.  No other royalties are payable on the granted Mining Leases (MLs) which cover 100% of Mineral Resources at the KGP. 
 
The Scoping Study estimates total pre-production capital costs at the KGP of $70m (comprising process plant and indirect capital cost of $57m), and non-process plant related capital of $13m (for waste material pre-strip, upgrade of TSF, ROM pad and haulage roads). 
 
Ausgold believes the modest sizing, potential for significant cash flow and technically low risk of the KGP should increase the possibility of attracting project funding (with a pre-production capital requirement at a modest $70m).  In the interim Ausgold will continue to define and de-risk the project by further drilling and technical studies.
 
Forward Looking and Cautionary Statements
 
A Scoping Study is an order of magnitude technical and economic study of the potential viability of Mineral Resources. It includes appropriate assessments of realistically assumed Modifying Factors together with any other relevant operational factors that are necessary to demonstrate at the time of reporting that progress to a Pre-Feasibility Study can be reasonably justified. Further assessment and more advanced studies are required to establish that targets and conclusions will be realised. Ausgold Ltd has concluded it has reasonable basis for the forward looking statements in this report. 
 
This information has been prepared in compliance with JORC Code 2012 Edition and the ASX Listing Rules. All material assumptions on which on which the forecast financial information is based have been included in this announcement. The Scoping Study referred to in this report is based on low-level technical and preliminary studies, and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised. There is a low level of geological confidence associated with Inferred Mineral Resources (which comprise less than 5% of the Jinkas and Dingo Mineral Resource within selected Whittle pit shells) or that the production targets will be achieved and there is no certainty that further exploration work will result in conversion to Indicated Mineral Resource.
 
This document may include forward-looking statements. Forward-looking statements are only predictions and are subject to risk, uncertainties and assumptions that are outside the control of Ausgold Limited. Actual values, results or events may be materially different to those expressed or implied in this report. Given these uncertainties, recipients are cautioned not to place reliance on forward-looking statements.
 
Subject to any continuing obligations under the applicable law and ASX Listing Rules, Ausgold Limited does not undertake any obligation to update or revise any information or any of the forward-looking statements in this document of any changes in events, conditions or circumstances on which any such forward-looking statement is based.
 
Significant Potential for Growth in Mineral Resource and New Discoveries at KGP
 
Ausgold has planned anew AC exploration program at the Jinkas West and Datatine prospects, which also comprises a systematic RC Resource Development drilling program at Jinkas, White Dam and Jackson aimed at adding additional ounces and accelerating mine development.
 
This program represents the first phase of Ausgold’s new exploration plan for the KGP. Ausgold has developed a number of high priority targets through a data review and consolidation. This review assisted by comprehensive geological modelling and estimation work conducted by Ausgold and SRK Consulting (Australasia) Pty Ltd (“SRK”) has identified numerous new target areas that have significant discovery and upside potential in addition to increasing the currently defined +600Koz Resource Estimate at the KGP.

High priority targets will be further refined and developed with geophysical interpretation, geological modelling, surface sampling (geochemistry) and AC drilling. 
 
3D mineralisation and Resource Modelling has identified opportunities to rapidly add new resources ounces with further drilling particularly at White Dam and Jackson where potential exists for extensions of mineralisation along strike and down plunge NNW. RC drilling is planned for these areas and at Jinkas.
   
Datatine
 
The Datatine prospect is located approximately 7km north of the Jinkas deposit and is a key example of a new and very prospective exploration target emerging from the new exploration model and targeting. This area was identified by SRK as a priority target from their work and further enhanced by a comprehensive consolidation and review of all previous exploration data in this area including geophysics, geochemistry and historic drilling. This includes positive results from historic drilling where results include 3m @ 3.47 g/t Au (BSAC1053) and 4m @ 13.60 g/t Au (DTR3). 
 
Datatine has been subject to limited exploration in the past as the target and gold anomalism did not appear to fit the ‘historic’ exploration models. The area is considered significantly prospective, as the new exploration model and detailed aeromagnetic imagery indicates that the potential folds are oriented with axis’ around EW to NE rather than NNW as at Jinkas. All historic drilling was orientated at 243 degrees (Local grid West) to intersect NNW trending mineralisation as predicted by the historic exploration model. Therefore, historic drilling direction was sub-optimal and unlikely to effectively test potential mineralisation. Contoured gold geochemistry correlates strongly with the strike of geophysical anomalies (Figure 13) and predicted structural setting of mineralisation, the planned areas of AC drilling are also shown in Figure 13.

 


Figure 13. Regional map showing selected new targets, anomalous geophysical responses, geochemical anomalism and potentially anomalous geochemical trends.

Jinkas West

The Jinkas West Prospect is located approximately 500m west of the Jinkas deposit and is another high priority target ready for AC drilling in close proximity to the Jinkas Resource.
 
A significant geophysical anomaly is interpreted to indicate a prospective fold structure. This geophysical anomaly is coincident with a potential geochemical trend that is interpreted to occur in favourable NNW trending geology. These observations indicate that the Jinkas West target is a high ranking exploration target.
 
Ausgold has planned a grid based first pass AC program over the Jinkas West prospect; the location of the AC drilling is shown in Figure 13.
 
Partial leach ionic soil geochemistry has proven alsoto be an effective exploration tool in identifying gold mineralisation at Katanning and is being used both to identify gold mineralised zones and targets within the KGP and to explore and extend of size of the gold system at a Katanning.  It is also being used to identify different styles of gold mineralisation now recognised within the project area, define additional gold targets, identify prospective geology, map associated structures and identify potentially mineralised blind magmatic intrusions (see also Figure 13).
 
White Dam
 
Recent geological re-interpretation and grade re-estimation at White Dam (Figure 5, Mineral Resource Locations at the KGP) has highlighted the presence of apparent high grade shoots and further 3D modelling of the high grade shoots has identified priority target zones for RC drill testing. 
 
A prioritised program of 4 initial RC holes is planned at White Dam as shown in Figure 14. The drilling has been prioritized into two stages. If the results of the priority one RC drilling are encouraging, the priority two drilling will commence. The priority two drilling is planned to follow the White Dam high grade shoot at depth 40-150m from the priority 1 RC section line.


Figure 14.White Dam Resource Development project showing 3D view of Mineral Resource Model, drill hole pierce points into the White Dam model (black dots), planned priority 1 drilling and interpreted extension of potential high grade shoot.

Jinkas

At Jinkas, recent Resource Modelling has identified an apparent gap in the high grade shoot (Figure 7). Infill drilling will serve to increase confidence in the continuity of the high grade shoot as well as potentially add ounces to the overall resource at Jinkas thereby improving the economics of the optimized pits. As White Dam is in the footwall of Jinkas (~90m below), a portion of the White Dam targeted holes will intersect Jinkas mineralisation.
 
The drilling has been prioritized into two stages. If the results of the priority one RC drilling are encouraging, the priority two drilling will commence.


 

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